Dell Eyes Computer Services

Share

Dell Eyes Computer Services

NEW YORK – Michael Dell, founder and chief executive of Dell Computer, has dominated the personal computer market and is moving into new areas such as data storage systems, handheld gadgets and printers.

But he is also eyeing one lucrative part of the computer sector not usually connected with the manufacturing maven – computer services.

The company, based in Round Rock, Texas, is creating a range of services that it hopes will help it reach its goal of nearly doubling overall sales, to $60 billion, in the next five years.

Dell currently helps companies design, install and manage information systems, a business that grew 45 percent in the first fiscal quarter. But these services bring in only a couple of billion dollars, compared with total revenue of about $35 billion in fiscal 2003.

Dell is seeking new revenue sources amid a downturn in demand for technology – although Dell has withstood that decline by selling directly to customers, helping it keep inventories and costs down, procure market share and increase profits.

However, it is unclear if Dell would be able to undercut rivals on price in the services sector, where manufacturing does not come into play.

Dell made a small acquisition last year and more recently has been adding employees, Michael Dell said in an interview at the company's headquarters recently.

"There's actually quite a few people that are available to hire. They have the skills and we kind of prefer that way of growing," Dell told Reuters.

"If we found a company that – these tend to be really small organizations – if we found one that was a great fit, we'd certainly entertain it but we're not out there kind of actively searching for acquisitions," he said.

Dell is vying for a bigger piece of a $445 billion market already in the sights International Business Machines and Hewlett-Packard – its traditional competitors in the increasingly cut-throat hardware business.

But Unlike IBM and HP, Dell is not aiming at the part of the service market in which a company takes over a data center and its employees or gives advice on how its client can improve technology links to its suppliers.

"We're not interested in competing with EDS or Accenture at the very high end of the consulting world, but we're providing the services that go along with the product," Dell said.

IBM bought PricewaterhouseCoopers Consulting last year specifically to get ahead in this business. HP has recently stepped up its efforts to sell these services, winning a large contract from consumer products giant Procter and Gamble.

Instead, Dell is entering the services marketplace through its computers. Computer hardware and software is becoming increasingly standardized, allowing Dell to create services packages that it can market along with the computers and storage machines it sells.

For instance, the company recently won a sizable contract with "a large school system" that involves 200,000 computer users, Michael Dell said.

Dell, which took the No. 1 personal computer maker slot last quarter as part of a tug-of-war with HP, is also working its way into businesses with other new products. It now sells data storage systems made in partnership with EMC and computer printers that are made by Lexmark International.

Dell has even asked shareholders to approve plans to drop "Computer" from its name this summer.